[The Editors' Verdict] Yoon Administration's Real Estate Policy Lacks a Clear Vision

If you are a multi-homeowner, would you sell your house now? Is it the right timing for genuine homebuyers to purchase? Regardless of your position, the market consensus is that now is not the time. In February, nationwide housing transactions amounted to 43,179 cases, which is only half of the same month a year ago. Seoul saw a 63% decrease, and the metropolitan area shrank by 66% (Ministry of Land, Infrastructure and Transport). This change began in earnest around September last year. At that time, the government introduced strong loan regulations such as limiting loans within the range of annual income. Since then, transaction volumes plummeted, and the sky-high housing prices finally started to decline.

And the presidential election is over. Various deregulation news has been coming out from the Presidential Transition Committee. The market reacted immediately as if it had been waiting. On the 31st of last month, there were 51,537 apartment listings in Seoul, but 559 disappeared within four days. Considering the current trend, it is more accurate to say that homeowners withdrew their listings rather than the market absorbing the supply. Especially in the three Gangnam districts, the decrease in listings is strong. The expectation that housing prices will rise further has become stronger than the opposite view. Last week, Seoul apartment prices rose by 0.01%, with Gangnam housing prices turning upward (Real Estate R114). The fact that housing prices are starting to fluctuate even before the new government takes office is an important change that should be viewed with caution.

While the market is unsettled, the major policy direction that the new government aims for is not visible. Even the sporadic ideas coming from the Transition Committee sometimes conflict with each other. The government decided to levy this year’s property tax based on last year’s official property prices, but the Transition Committee went further and suggested using the prices from the year before that (2020). It is a contradictory message: on one hand, reducing the property tax burden, and on the other, lowering transaction taxes to encourage selling houses. Moreover, since most of the deregulation proposals from the Transition Committee are likely to stimulate the market, there is suspicion that the new government is accepting the current housing price levels as reality and is reluctant to pursue further adjustments.

Here, a clear proposition that no one can easily dispute must be revisited: at the very least, another significant surge in housing prices must be prevented. If the core of this presidential election was to judge the current government for blocking young people’s paths to homeownership and letting housing prices soar, then the direction that the Yoon Seok-yeol administration should pursue is already determined. In that sense, signs of easing the loan regulations, which have been a decisive factor in stabilizing housing prices, are worrisome. Even if it is not a full-scale easing, it is natural for the market to interpret deregulation as a trigger for rising housing prices.

Measures such as lifting distortive regulations or adjusting taxes to restore market principles are only some of the many tools in real estate policy. More important is sending clear and sophisticated signals to the market. For example, a clear declaration that while incorrect regulations will be eased, housing prices will not be allowed to rise further.

As President-elect Yoon Seok-yeol well knows, real estate cannot be explained solely by the simple principles of supply and demand. It encompasses all of our lives, dreams, desires, and hopes. The idea that simply doing the opposite of the Moon Jae-in administration will lead to success is unlikely to solve this complex issue. The Yoon administration may not view investment as a sin, but the only message that can calm the current turmoil is that it will not tolerate turning homes meant for ordinary citizens into speculative targets. There is no doubt that this must be the starting point of the new government’s real estate policy.

Shin Beom-su, Head of Construction and Real Estate Department

This content was produced with the assistance of AI translation services.